The largest source of low-interest loans administered by the U.S. Department of Education is the Federal Direct Loan program. Direct Loan funding is available to all undergraduate students who have completed the FAFSA, enrolled as a matriculated student in an eligible degree program, registered for at least six credit hours per term, are U.S. citizens or resident aliens, and who are not in default on a prior student loan. Creditworthiness is not a requirement for the Direct loan.
Direct loans are either subsidized (e.g., the loan does not accrue interest while the student is enrolled in at least six credit hours) or unsubsidized. Subsidized loans are awarded on the basis of financial need as determined by the financial data provided by the student on the FAFSA and in conjunction with other forms of financial aid awarded to the student. Unsubsidized loans are available to students who may not have “need,” but who would benefit from having access to a low-interest student loan program. Unlike with the Subsidized Direct Loan, the government does not pay the interest that accrues for Unsubsidized Direct Loan borrowers, even while they are enrolled in at least six credit hours in an eligible program of study.
Amounts
Through either Subsidized or Unsubsidized Direct Loans, students can borrow the following maximum annual amounts:
- $5,500 for undergraduate students who have completed fewer than 30 credits, with no more than $3,500 in the subsidized loan
- $6,500 for undergraduate students who have completed 30 to 59 credits, with no more than $4,500 in the subsidized loan
- $7,500 for undergraduate students who have completed more than 60 credits, with no more than $5,500 in the subsidized loan
In addition to the Direct Loan limits listed above, independent students (or dependent students whose parents are unable to borrow a Federal Direct PLUS Loan) may borrow additional amounts under the Unsubsidized Direct Loan program, as follows:
- $4,000 per year for undergraduate students who have completed fewer than 59 credits
- $5,000 per year for undergraduate students who have completed more than 60 credits
In addition to annual borrowing limits, students are also limited in the total amount they can borrow from the Direct Loan program during their undergraduate and graduate academic careers. These limits are referred to as aggregate loan limits and will vary depending on the student’s dependency status and academic level (undergraduate versus graduate). The aggregate amount a dependent undergraduate student may borrow from the Subsidized and Unsubsidized loan programs combined is $31,000 (with no more than $23,000 in the subsidized loan.) Independent undergraduate students or dependent students whose parents are unable to borrow a Federal Direct PLUS Loan may borrow a total of $57,500 (with no more than $23,000 in the Subsidized loan.)
Application
The Financial Aid Office will notify the student when to sign their Master Promissory Note (E-signature MPN) for their Direct Loans.
Disbursement
Monmouth University is responsible for delivering the funds to the student; funds will be transferred electronically to the student’s account. All first-time Federal Direct Loan borrowers must participate in Entrance Counseling before receiving the first disbursement of their loan proceeds. For your convenience, Entrance Counseling may be completed online.
Interest and Fees
The interest rate for both the Subsidized and Unsubsidized loans for undergraduates during the 2023-24 academic year is fixed at 5.50%.
Borrowers are charged, by the federal government, an upfront origination fee of 1.057% of the principal amount of the loan.
For students who borrow under the unsubsidized loan program, the interest must be paid by the borrower. This can be done in one of two ways. While the student is enrolled, the borrower can pay the interest as it accrues. Alternatively, rather than pay the interest during periods of enrollment, borrowers can have that interest capitalized, which means adding it to the principal amount borrowed. All capitalized interest must be repaid. The important thing to note here is that capitalized interest becomes principal in this process. Thus, students who use this second option end up paying interest on accrued (and then capitalized) interest.
For all Direct Loan borrowers, repayment of principal and interest begins six months after graduation or termination of enrollment on at least a half-time basis. The federal government requires that students complete Exit Counseling when they graduate, withdraw, or drop below half-time attendance (i.e., less than six credits). For your convenience, Exit Counseling may be completed online. The federal Loan Simulator helps you calculate student loan payments and choose a loan repayment option that best meets your needs and goals.